Wealth Preservation & Estate Basics

Earlier chapters were about building wealth. This one is about keeping it — and making sure it reaches the people you intend, without years of court battles. For a founder, this matters more than for most people: your wealth is often lumpy (a big equity exit, a chunk of ESOPs, property), and your family rarely knows where everything is. The single biggest cause of family wealth disputes in India is not greed — it's the absence of a clear paper trail. Let's fix that.

The one idea that trips up almost everyone: nominee ≠ legal heir

Define the two terms before anything else:

Nominee

The person you authorise to receive an asset when you die. Think of them as a collection agent — the bank/fund hands the money to them so the asset doesn't get stuck.

Legal heir

The person legally entitled to own the asset — decided by your will (if you wrote one) or by succession law (if you didn't).

These are not the same thing, and confusing them is the most expensive mistake in this chapter. In 2024 the Supreme Court finally settled a decades-old dispute in Shakti Yezdani v. Jayanand Jayant Salgaonkar. The ruling: a nominee is only a trustee/custodian who holds the asset for the legal heirs. Nomination is not a third way of inheriting. The nominee must pass the asset on to whoever the will or succession law says owns it.

The one real exception: life insurance "beneficial nominee"

Insurance is different. After a 2015 amendment to the Insurance Act, 1938, if your life-insurance nominee is an immediate family member — spouse, parent, or child — they are a beneficial nominee and keep the proceeds as owner, not merely as a trustee. So for a term-insurance payout to your spouse, the money is genuinely hers. This is the one place where "nominee = owner" holds true. Everywhere else (banks, mutual funds, demat, shares) the nominee is only a custodian.

Wills: the cheapest, most powerful estate tool

A will is a legal document stating who gets what after you die. It is governed by the Indian Succession Act, 1925. A valid will needs surprisingly little:

• You (the testator — the person making the will) are of sound mind.
• It is signed by you.
• It is attested by two witnesses — and crucially, a witness must not be a beneficiary (don't let the person inheriting also sign as a witness).
• No stamp duty is payable on a will. It can be hand-written on plain paper.

Registration is optional but recommended. Registering with the Sub-Registrar costs only a few hundred rupees and creates a strong presumption that the will is genuine — making it far harder for a disgruntled relative to challenge it.

Probate

A court order certifying a will is genuine. In India it is compulsory only for Hindus/Sikhs/Jains/Buddhists when the will is made — or the immovable property sits — within the original jurisdiction of the Mumbai, Kolkata, or Chennai High Courts. Elsewhere it's usually optional.

Succession certificate

What heirs must obtain when there is no will, to claim debts and securities. It costs roughly 2–3% of estate value in court fees (capped in some states, e.g. around ₹75,000), plus legal and newspaper-notice costs.

What happens with no will: intestate succession

Intestate means dying without a valid will. For Hindus, Sikhs, Jains, and Buddhists, the Hindu Succession Act, 1956 (HSA) takes over. (Muslims, Christians, and Parsis follow their own laws.) For a Hindu male dying intestate, property goes first, equally, and simultaneously to Class I heirs: widow, mother, sons, and daughters (plus children of any predeceased child).

A landmark update: the 2005 amendment to Section 6 HSA made daughters coparceners by birth — equal to sons in ancestral/HUF property. In Vineeta Sharma v. Rakesh Sharma (2020), the Supreme Court confirmed this right exists by birth and applies even if the father died before 2005.

Joint holding, survivorship, and the new SEBI nominee rules (2025)

Survivorship means that on the death of one joint holder, the asset passes to the surviving holder(s). Common modes: "Either or Survivor," "Former or Survivor," "Anyone or Survivor." Note: survivorship governs who holds custody — the survivor may still hold the deceased's economic share for that person's heirs.

SEBI overhauled nomination rules (notified Jan 2025, phased in from Mar–Jun 2025): you can now register up to 10 nominees per mutual-fund folio or demat account, each with a specified percentage. For single-holder accounts, nomination is effectively mandatory (or you must explicitly opt out). If all joint holders die with no nominee registered, the asset goes to the legal heirs of the youngest joint holder.

WHO ACTUALLY GETS THE ASSET? (decision flow)

  Death of holder
        |
   Joint account? --yes--> Survivor takes CUSTODY
        | no                 (still holds deceased's
        v                     share for that person's heirs)
   Nominee registered? --yes--> Nominee COLLECTS
        | no                     |
        v                        v
   Will exists? ----------> Will decides OWNERSHIP
        | no                (nominee = trustee only,
        v                    except life-insurance family)
   Succession law (HSA etc.)
   decides ownership

India has no inheritance tax — but watch the capital gains

Good news: India has no estate or inheritance tax. Estate duty was abolished in 1985 and gift tax in 1998. Simply inheriting an asset is completely tax-free. Tax only arises later, when the asset earns income or is sold.

The catch is cost basis carry-over: when you inherit, you also inherit the original owner's purchase cost and purchase date. So your capital gain is measured from their acquisition, not the date you inherited.

Post-Budget 2024 (effective 23 Jul 2024), capital-gains rates on listed equity/equity mutual funds are: LTCG 12.5% on gains above ₹1.25 lakh/year; STCG 20%. Holding period for "long-term" is 12 months for listed securities, 24 months for property/unlisted shares. Add 4% cess (and surcharge where applicable).

HUFs and trusts (high level)

A HUF (Hindu Undivided Family) is a separate tax entity with its own PAN and slab — historically used to split income across an extra "person." But HUF assets are commonly owned and notoriously hard to partition cleanly; the karta (manager) controls it, while coparceners (including daughters post-2005) hold birthrights. A private family trust (Indian Trusts Act, 1882) — where a settlor hands assets to a trustee to hold for beneficiaries — is increasingly preferred by wealthy families to control succession, protect minor or special-needs heirs, and skip probate delays. Movable-asset trusts have low setup cost and no stamp duty; trust taxation, however, is complex and can attract the maximum marginal rate.

Digital assets, unclaimed money, and lifestyle inflation

India has no specific digital-asset inheritance law — crypto, domains, cloud accounts, and loyalty points fall in a legal gap. The fix is non-legal: maintain an asset register (every account, insurer, demat, FD, locker, and login), store credentials securely (a password manager or sealed instructions), and keep nominees updated everywhere. Money nobody knows about ends up unclaimed: deposits inactive for 10 years move to the RBI's DEA Fund, recoverable via the UDGAM portal; unclaimed shares/dividends go to the IEPF.

Finally, the quiet wealth-killer: lifestyle inflation — as income rises, spending creeps up and your savings rate stays flat, so no real wealth gets built. The fix is mechanical: pay yourself first, automate your SIP, cap fixed lifestyle costs, and target a savings rate of 20–30%+.

Key Takeaways

• Nominee ≠ owner. A nominee only collects the asset and holds it in trust for legal heirs — except a spouse/parent/child nominee on a life-insurance policy, who keeps it.
• Write a registered will. Zero stamp duty, two non-beneficiary witnesses; it overrides nominations and saves your family the 2–3% succession-certificate cost plus years of litigation.
• No will = the law decides. For Hindus, Class I heirs (widow, mother, sons, daughters) split equally; daughters have equal coparcenary rights by birth since 2005.
• India has no inheritance tax, but inherited assets carry over the original cost and date — capital gains (LTCG 12.5%, STCG 20% on listed equity) apply only on later sale.
• Register up to 10 nominees on demat/MF folios under the 2025 SEBI rules, and keep them current — an ex-spouse left as nominee is a real risk.
• Maintain an asset register so nothing vanishes into the RBI DEA Fund or IEPF; secure your digital credentials.
• Protect your savings rate — beat lifestyle inflation and never carry revolving credit-card debt at 30–48% APR.